Securities and Futures Commission v. Tam Chung Wai and Others

HCA 215/2025

[2026] HKCFI 1610

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 215 OF 2025

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BETWEEN

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D E C I S I O N

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Introduction

1.By summons dated 5 September 2025 (“the Summons”), the Securities and Futures Commission (“SFC”) applies for interlocutory injunctive relief against D1, D3, D6 (collectively “the Opposing Ds”), D8 and D16 in this action (“the Action”) brought both under the court’s Mareva jurisdiction under s.21L of the High Court Ordinance, Cap 4 and pursuant to s.213 of the Securities and Futures Ordinance, Cap 571 (“the SFO”).

2.By way of background, the SFC has instituted criminal proceedings against D1 to D12 on the ground of their alleged commission of an offence(s) under s.300 of the SFO. The criminal proceedings are still ongoing. Briefly stated, the provision creates an offence for, direct or indirect, (1) employment of any scheme with an intent to defraud or deceive or (2) engagement in any fraudulent or deceptive act, practice or course of business in a transaction involving securities, futures contracts or leveraged foreign exchange trading.

3.S.213 of the SFO empowers the Court to make compensatory and restorative orders against the offenders of s. 300.

4.The case of the SFC is that Ds perpetrated a “ramp-and-dump” scheme (“the Scheme”) from 28 February 2019 to 15 May 2019 (“the Relevant Period”) whereby substantial profits out of the trade in the shares of KNT Holdings Ltd (1025.HK, “KNT”) were fraudulently reaped.

5.The injunctions sought against the Opposing Ds, D8 and D16 are, among other things, to injunct each of them from disposing of, dealing with or diminishing the value of his/her assets within Hong Kong up to the value of HK$219,012,769.00.

6.The Opposing Ds resist the SFC’s application. At the substantive hearing of the Summons, they are represented by Ms Queenie Lau SC leading Mr Chow whereas the SFC is represented by Ms Eva Sit SC.

7.D8 has reached a settlement with the SFC in respect of the Summons and this application no longer concerns her. D16, acting in person, has never responded to the Summons and does not appear.

8.The broad grounds of opposition advanced by the Opposing Ds include:

(1) the delay in making the present action caused prejudice to Ds particularly those who are being prosecuted. There is a risk that they have to disclose their defences to the criminal charges prematurely;

(2) the SFC fails to meet the requisite standards to show the merits of the Action;

(3) the present application is “largely unnecessary” because of the restrictions already in place;

(4) the SFC fails to establish risk of dissipation on the part of the Opposing Ds and

(5) the balance of convenience is against the grant of an injunction.

The case of the SFC

9.Ms Sit has provided a meticulous summary of the case of the SFC in her written submissions and the primary facts are well supported by contemporaneous documents. The following is largely an adaptation of her summary.

10.KNT is a Cayman company carrying on its business in the manufacture of bridal gowns in the Mainland.

11.KNT undertook its initial public offering (“IPO”) in late 2018 or early 2019. On 28 February 2019, the shares of KNT were first listed on the Main Board of The Stock Exchange of Hong Kong at HK$0.98.

12.During the Relevant Period, Ds are alleged to have taken part in the Scheme and caused:

(1) substantial amounts of KNT shares to be acquired (through IPO subscription and market acquisition upon listing), such that ~65.4% of all publicly tradeable KNT shares were concentrated in their hands or in the hands of their nominees (“the Traders”);

(2) the Traders to trade in substantial amounts of KNT shares, through coordinated and manipulative trades which displayed highly unusual patterns, that had the effect of raising the nominal price of KNT shares by more than 400%, from the IPO price of HK$0.98 to HK$4.97 on 10 May 2019;

(3) positive news on KNT to be released on 14 to 15 May 2019 to further raise market interest in and share price of KNT, which reached the highest of HK$5.28 at 09:30 a.m. on 15 May 2019; and

(4) in conjunction with such final “push”, the Traders to dispose of their KNT shares, and they disposed of all their shares on 14-15 May 2019.

13.When the sale of all their shareholdings and there being no true market demand commensurate with the inflated volume and price, KNT share price drastically plummeted from HK$5.28 at 09:30 a.m. to HK$1.28 at 10:31 a.m. and closed at HK$1.26 on 15 May 2019.

14.The sale volume of the KNT shares and their prices throughout the Relevant Period are shown in the following graph provided by Mr Hekster, the market expert commissioned by the SFC, in his report dated 8 July 2024 (“the Hekster Report”):

The Opposing Ds and their alleged involvement in the Scheme

15.D1 and D2 are the central figures in the Scheme. D3 is D1’s younger brother and D6 is D1’s mother. D8 is the ex-wife of D2 and D16 is the ex-wife of D1.

16.To carry out the Scheme, D1 and D2 controlled and directed securities accounts of 25 Traders to carry out the impugned transactions in KNT shares during the Relevant Period.

17.D1 was in charge of the securities accounts of 19 traders including those of D3, D6 and D16 (collectively “TT Traders”) through his position or association with China Industrial Securities International Brokerage Limited (“China Industrial”) and Sun Hung Kai Investment Service Limited (“SHK”).

18.D2 controlled the securities account of 6 Traders (those of D7 to D12) (collectively “ST Traders”) via two licensed brokerages, namely, China Rich Securities Limited (“China Rich”) and Enlighten Securities Limited (“Enlighten”). China Rich is now known as Wings Securities (HK) Limited.

19.The Scheme, broadly speaking, consisted of three stages. The first stage was the accumulation stage (“Stage 1”) when sizable blocs of KNT shares were accumulated at relatively low prices, i.e. cornering the market.

20.The second stage was the “ramping” stage (“Stage 2”) and through coordinated and manipulative trades without much increase in their collective holdings, the trading volume and share price of KNT shares were ramped up.

21.The third stage was the “dumping” stage (“Stage 3”). When the price near or hit the highest level, the Traders disposed of all the KNT shares to market investors at artificially inflated prices making a substantial profit.

22.At Stage 1, D2 together with D4, D5 and D12, sourced placees to subscribe for KNT shares in the IPO by offering them a guaranteed return. Such placees (turning out to be the Traders) were required to transfer the KNT shares subscribed or proceeds thereof to the order of Ds and they were only entitled to the guaranteed return.

23.On the other hand, D1 and D2 set up or arranged to be set up securities accounts for the Traders for the purpose of the Scheme. D1 also caused margin loans to be made available and “no-bid” restrictions lifted for the China Industrial accounts for the trading of KNT shares.

24.After listing, the Traders including D3, D6 and D8 immediately purchased a large number of KNT shares from the market by using aggressive purchase orders (bid price ≥ best offered price, sometimes by a few spreads more) causing a surge of the share price from HK$0.98 to HK$2.57 (162% increase).

25.The evidence adduced by the SFC to prove Ds’ activities at Stage 1 includes the following matters.

26.First, the contemporaneous WhatsApp messages of D2, D4, D5 and D12 show the coordinated subscription of KNT shares in the IPO. It can be seen that D4 (through Quasar) got the engagement to source placees to take up 90,000,000 KNT shares by offering them a guaranteed 3-4% return. On receipt of a sum of RMB6,782,000 as introduction fee from one Johnson Chong in the bank accounts controlled by him, D4 worked with D2 to look for placees. D5 eventually came up with a list of placees and submitted the same to D2. D5 and D12 reported to D2 on the shares held and amounts to be repatriated by the placees less the guaranteed return. D2 also arranged ST Traders to subscribe for 1,300,000 KNT shares in the IPO.

27.Second, the setting up and/or control of the accounts of the TT Traders and the ST Traders are evidenced by contemporaneous records as well. Some of the TT Traders were oversea residents. They were not in Hong Kong on the dates when they opened their securities accounts as shown by their movement records. According to their China Industrial account opening forms and their bank details, D1 was their account executive and they all opened bank accounts at the same branch of Standard Chartered Bank.

28.A list of online access passwords for their accounts at China Industrial and Enlighten was seized from an associate of D2 and WhatsApp exchanges from D1 to reset the password for a TT Trader. Further, written authorisation was given by D6 and confirmation was made by D16 to China Industrial and SHK that D1 conducted KNT shares trades in their accounts.

29.A written authorisation dated 16 November 2017 was given by D8 as the ex-wife of D2 to Enlighten to enable D2 to open an account on her behalf.

30.The Hekster Report provided a detailed analysis of the trade of KNT shares during the Relevant Period. Aggressive purchase orders were made in the first 3 trading days of KNT shares and a substantial amount of KNT shares were held by a small number of investors only. This was evidenced by the announcement of the SFC of the position as at 4 March 2019.

31.Stage 2, as explained by Ms Sit, proceeded as follows:

(1) KNT share price was “ramped up” to an artificially inflated level and a semblance of high market interest in KNT shares was created, which set the scene for the Traders to unwind their positions and make profits to the detriment of market investors.

(2) The result was that (i) KNT share price rose from HK$2.57 on 4 March 2019 to HK$4.95 on 10 May 2019 (both closing price) (93% increase), even though the Hang Seng Index dropped by 1.4% during this period; (ii) trading volume in KNT shares was not high (i.e. not much market interest other than the Traders trading); and (iii) despite the volume of activities by the Traders, they controlled their total KNT holdings which only increased slightly.

(3) According to the Hekster Report, the Traders’ KNT trades displayed (inter alia) the following unusual features which indicate they were not the result of normal market forces:

(a) First, the Traders including D3, D8 and D16 continued to place “aggressive” purchase orders for KNT shares of the 562 purchase orders placed by them during Stage 2, 385 (68.5%) were “aggressive”, of which 271 orders had a direct effect in raising the share price.

(b) Second, the Traders including D3, D8 and D16 conducted “matched trades” (i.e. both sides to the trade were the Traders). This means that while there appeared to be trading activities which impact (increase) the share price, there was no change in the collective holdings and economic position of the Traders. There were 229 “matched trades” during Stage 2, and they accounted for 19.1% of the total traded volume during Stage 2.

(c) Third, while the Traders’ gross trading volume during Stage 2 made up 37% of the total gross market volume, there was no comparable increase in their total KNT holdings on the contrary they actually net sold KNT shares.

(d) Fourth and related to (c) above, since 25 March 2019 the Traders changed their trading pattern, that while they continued to use “aggressive” purchase orders and “matched trades”, they also entered many passive sell orders, with the effect that they could maintain the perception of substantial market interest and continue to raise KNT share price, while being able to begin to sell down their holdings without impacting the price. The Traders net sold 15,284,000 shares by the end of Stage 2.

32.The SFC relies heavily on the thorough analysis of the trading of KNT shares during the Relevant Period in the Heskster Report. It was observed that the matched trades conducted by the Traders including D3, D8 and D16 placed were characterised by large purchase quantities and short time interval between the insertion of a sizable passive sell order by one Trader and then an aggressive purchase order by another Trader. It was found that 181 (79%) were concluded within 10 minutes of the placing of sell and purchase orders, of which 129 (59%) were concluded within 2 minutes and that between 5 to 22 March 2019, 37 (out of 81, 46%) were concluded within 60 seconds.

33.Further, there was an observable pattern of the Traders placing orders in the last 5 minutes of the trading day. This raised the closing price and gave a positive indication of KNT shares to market investors.

34.Contemporaneous WhatsApp messages show that during Stage 2, D1 and D2 respectively monitored the KNT holdings in the Scheme by D3, D13 and D15.

35.For Stage 3, the release of positive news on KNT’s business performance by D1 and D2 is evidenced by the following contemporaneous WhatsApp messages between D4, D15 and them and the timing of such release is significant:

(1) WhatsApp messages on 16.4.2019 between D2 and D4 on the need to release news about KNT’s business by mid-May 2019, followed by a reminder from Simon Tam on 29 April 2019, specifying the news must be released in the evening of 14 May 2019 or the morning of 15 May 2019.

(2) WhatsApp messages from 8:42 p.m. on 14 May 2019 between D1 and D14 whereby D14 provided the name, contact details and pricing of a public relations company for the release of KNT news.

(3) WhatsApp messages from 9:44 p.m. on 14 May 2019 between D1 and D2, in which they discussed the content of the draft news report on KNT to be released, which was pending Johnson Chong’s confirmation, which went into the morning on 15 May 2019 when they confirmed Mainland online media had also published the same.

(4) News reports on KNT’s business were released on online discussion platforms, including babykingdom.com (14 May 2019 at 11:05 p.m.) and finance.discuss.com.hk (14 May 2019 at 11:06 p.m.), which resembled the exact wording of the draft in §(2) above.

36.In the Hekster Report, the findings on the actual trading data are as follows:

(1) On 14 May 2019, the Traders disposed of 27,448,000 shares (42% of total holdings) in the absence of any negative news on KNT.

(2) Such coordinated and inexplicable unwinding of the Traders’ position makes the allegation that all 25 Traders were individually speculating in KNT shares highly implausible.

(3) Prior to the collapse of KNT share price on 15 May 2019 at 10:22 a.m., the Traders further disposed of 6,568,000 KNT shares, representing 30% of the total traded volume on that day up to that point.

(4) After the collapse of the KNT share price, the Traders started to place “aggressive” sale orders (i.e. offer price equal to or below prevailing best bid price), sometimes with the offer price below the best bid price by several spreads, to get rid of their remaining KNT shares as quickly as possible. By the end of 15 May 2019, the Traders sold all of their KNT shares.

(5) There is no evidence of any negative news to support the allegation that the Traders’ opinion on the market prospects of KNT drastically changed throughout that day.

37.As a result of the Scheme, the Traders have made a profit of HK$143,188,880 in aggregate during the Relevant Period. The preliminary calculations of the SFC are that market investors induced to purchase KNT shares on 14 to 15 May 2019 alone suffered losses of HK$219,012,769 (“the Estimated Loss”).

38.For the individual involvement of Ds in the Scheme, the SFC relies on the Affirmation of Chow Chun Pong dated 9 September 2025. Mr Chow is an Associate Director in the Enforcement Division of the SFC.

39.D1 is alleged to be the ringleader and one of the lead perpetrators of the Scheme. He was heavily involved in all the three Stages.

40.At Stage 1, D1 was involved in the following manner:

(1) he established and arranged to be put to use accounts of TT Traders for the purpose of the Scheme.

(2) he directed and instructed the orders and trading of TT Traders in KNT shares to corner the market.

(3) he obtained margin loans and caused China Industrial to lift “no-bid” restrictions for TT Traders for trading in KNT shares.

(4) he directed D3 to monitor TT Traders’ accounts on KNT shares and report to him.

41.At Stage 2, D1 caused TT Traders including D3 and D16 to place aggressive purchase orders and conduct matched trades and arranged various off-market over-the-counter trades between TT Traders and ST Traders.

42.At Stage 3, D1 procured TT Traders to sell all of their KNT shares on 14-15 May 2019 before the price collapsed. He also orchestrated the release of positive news on KNT’s business on 14 May 2019 and procured D3 and D6 to transfer to him part of their profits from the Scheme in the respective amounts of HK$20,000,000 and HK$700,000.

43.D3 is accused of helping D1 throughout Stages 2 and 3 and assisted in monitoring and managing the trading activities of TT Traders and reported the same to D1. In particular, D3 on 27 May, 3 June and 12 June 2019 transferred HK$700,000 of his profit to accounts held by D1.

44.The specific allegation against D6 is that on 14 May 2019 she transferred HK$20,000,000 of her profit to a DBS bank account held by WRUI Trading Ltd (“WRUI”), from which D1 admitted having withdrawn the same amount soon after. Given her personal background, D6 must be aware that her KNT shares trades were not genuine and certainly not on her own account. D6 has the highest realised profit among all the Traders.

45.D16 placed 10 aggressive purchase orders and 2 matched trades at Stage 2. She held 516,000 shares as at 10 May 2019. The total profit made by her is HK$801,200. Her current whereabout is unknown and there is an extant arrest warrant against her.

The case of the Opposing Ds

46.All of the Opposing Ds have filed their respective affirmations to resist the Summons. In addition, Mr Ivan Wong who is an assistant solicitor of Messrs. NEO Solicitors LLP (“NEO”) for the Opposing Ds made an affirmation as well.

47.D1 denies the existence of the Scheme. He was an account executive at China Industrial and his duties included managing client accounts, providing investment advice, executing buy/sell orders and monitoring stock performance to meet clients’ goals. All the TT Traders were his genuine clients and he identified the listing of KNT shares a reasonable investment opportunity for the TT Traders. D1 maintains that all his clients’ trades in KNT shares were carried out either on their own, or (in the case of D6) on their previous authorisation for China Industrial (or him as their account executive) to do so.

48.D3 used to be in the engineering field between 2008 and 2017. From 2018 to 2020, he worked as an assistant to D1 and stationed in his office at China Industrial and help him to manage his clients’ accounts. He claims that he has long been a securities trader since his days in the university and he told advice from D1 from time to time.

49.For his trade in KNT shares, D3 claims that he only bought KNT shares from the opening market after its IPO. Though it was D1 who introduced KNT shares to him, he made all the decisions relating to the sale and purchase of KNT shares independently.

50.D3 accepts that transferred part of the profits made out of his trade in KNT shares to D1 in the sum of HK$700,000. D3 contends that it was his repayment of a loan advanced to him by D1 in May 2019 only and had nothing to do with KNT shares or the Scheme.

51.D3 further disagrees that he ever placed aggressive orders when trading in KNT shares and the sole purpose of his dealing with KNT shares was to make profits for himself. He denies having placed any orders with the intention of cornering or artificially raising the traded volume in KNT shares. All his reports to D1 on the TT Traders were made in the course of his performance of his job duties as his assistant only. He believes that given his assistance, D1 could work remotely while out of office meeting with his clients and handling other businesses.

52.Despite the considerable financial support given to her by D1 and D3, D6 continues to work as a dishwasher whilst residing at Cluny Park, a luxurious development in the Mid-levels. She maintains that she uses the maintenance contributions given to her by her two sons to make investments in the securities market. As summarised by Ms Lau, her case is that she asked D1 to manage her investments and let him operate her account at China Industrial and followed his advice in preserving her profits in trading KNT shares by withdrawing HK$20 million in cash for safekeeping at home.

Applicable legal principles

53.There is no debate about the legal principles applicable to the present application.

54.Ms Sit refers to Securities and Futures Commission v A [2008] 1 HKC 89 in which Kwan J (as she then was) expounded the general principles relating to applications made under s.213 at §§26-29. Ms Sit’s following summary of the same suffices for present purposes:

(1) Before an interim injunction could be granted, there must be established (i) a prima facie case of contravention of a relevant provision of the statute and (ii) there is an appreciable, not fanciful, risk that without the injunction, proper compliance under the statute would be frustrated.

(2) Although the traditional equitable principles that govern the grant of interlocutory injunctions, such as whether there is a serious question to be tried, the risk of dissipation of assets and where the balance of convenience lies do not limit the scope of the exercise of the statutory power, these traditional principles of equity nevertheless provide a sound basis for a preliminary assessment.

(3) In considering whether it is desirable that an order should be made, the court should ask if the injunction would have some utility or serve some purpose within the contemplation of the statute.

55.S.213(2)(c) empowers the court to make an order restraining or prohibiting a person from acquiring, disposing of, or otherwise dealing in any property specified in the order. Such an order can be made against such persons set out in s.213(1), which include those persons who have aided, abetted or otherwise assisted, counselled or procured a person to commit any contravention of s.300 and those persons who have directly or indirectly been in any way knowingly involved in, or a party to any such contravention.

56.Ms Sit draws my attention to Securities and Futures Commission v Qunxing Paper Holdings Co Ltd (No 2) [2018] 1 HKLRD 1060. At §52, G Lam J (as he then was) observed that the terms of s.213(2)(b) are very wide. At §56, the learned judge went on to say that not only is the provision striking in its width, it is also remarkable in that the cause of action it creates appears to be discretionary. The learned judge then had this to say,

“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 sub-s.(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.For Mareva injunctions, the SFC must, additionally, show that it has a good arguable case on the substantive claim and there is a real risk of dissipation of assets.

58.Ms Lau rightly submits that in assessing the case of the SFC against the Opposing Ds, individual assessment is called for. The strength of the SFC cases against each of them may differ.

Discussion

59.The allegation of the Scheme is supported by solid factual and expert evidence in my view. The primary trade data cannot be disputed and the analysis of such data by Mr Hekster is not contradicted by any contrary evidence. I have heard no challenge to his analysis at all.

60.It is fairly obvious that D1 played a pivotal role in the Scheme, from start to finish. He procured the securities accounts of the TT Traders including D3 and D8 to be opened and took charge of the same. He placed aggressive purchase orders for them and arranged matched trades. There is no convincing documentary evidence that such Traders gave him instructions to conduct trades on their behalf.

61.The contemporaneous WhatsApp messages created by D1 are also telling.

62.When the evidence of the SFC is considered as a whole, the overall picture is intolerably clear. Through the concerted effort of D1 and D2, having control over the securities accounts of the Traders, a huge profit was reaped as a result of the Scheme and market investors suffered substantial loss. I believe that the reasonable and logical conclusion is that the Scheme was devised and executed for fraudulent and deception purposes.

63.D1’s plea of innocent is not really supported by evidence. Mr Chow in his reply affirmation leaves no stone unturned to attack D1’s case by his forensic analysis. While I should not conduct a trial on affidavit evidence, it is a fair observation that D1 has failed to provide any contemporaneous documentary evidence to support his allegations that he dealt with KNT shares on the instructions of the Traders. Put mildly, the complete lack of such evidence presents a serious problem to his case.

64.I am driven to the conclusion that the SFC has shown a good arguable case of D1’s commission of an offence under s.300(1) and D1 is a person within s.213(1)(a)(i)(A).

65.Given the compelling evidence of the Scheme employed by D1, the alleged trading activities of D3, his brother, and D8, his mother, could hardly be innocent and genuine.

66.D3’s case is unconvincing. He was an engineer by profession. Of course, he could be an investor at the same time but he has failed to disclose his experience in securities trading other than his many aggressive purchase orders relating to KNT shares. He has also failed to provide any evidence showing how he financed his investment in KNT shares. It is unknown why he decided to quit his profession and became an assistant of D1 and dealt in KNT shares alone. His allegation that he made all the decisions in his trade of KNT shares independently is doubtful.

67.D3 contends that the Hekster Report is unreliable. Yet, he has adduced no contrary expert evidence to give an innocent explanation for their trading of KNT activities during the Relevant Period.

68.D’s explanation for his transfer of the aggregate amount of HK$700,000 does not have credence. He gave no details of the alleged loan and did not explain why it was advanced in three instalments. The amount of the alleged loan is inexplicably close to the total amount of profit made out of his trade in KNT shares. He adduced no evidence of D1’s repayment of the alleged loan.

69.The defence case of D6 is even weaker. To start with, it is hard to believe that a dishwasher would spend a very substantial amount of her savings on a new share at the IPO stage no matter how trustworthy she allegedly found D1 to be. Further, D6 did not explain how she kept her savings and how she used the same to purchase the KNT shares with the appropriate documentary evidence.

70.Ms Lau highlights to this court that D6 merely purchased KNT shares from the initial acquisition and sold all her shareholding in three tranches in March and May 2019. She submits that this pattern of trade does not fit the execution of the alleged Scheme.

71.I cannot agree with her. The placing of the 8 aggressive purchase orders at Stage 1 and the dumping of all her shares in May 2019 were within the Scheme in the absence of any plausible explanation for such moves.

72.It is noteworthy that she actually came out as the most successful Trader making the maximum profit of HK$36,780,000 (“the Profit”).

73.D6’s dealing with the Profit is questionable. She alleges that D1 advised her to keep some cash at home for safekeeping and contingency. She followed his advice and transferred HK$20 million to WRUI and then D1 helped her to withdraw such sum for her safekeeping at home.

74.Far from being convinced of her innocence, I am leaning towards the conclusion that D6 knowingly assisted D1 to implement the Scheme and handle the Profit.

75.D16 has filed no evidence to oppose the Summons. The allegations of the SFC against her are left unanswered.

76.On the evidence, I am satisfied that the SFC has made out a good arguable case that D3, D6 and D16, all related to D1, have aided and abetted D1 to execute the Scheme and contravene s.300(1) and they were directly or indirectly knowingly involved in D1’s commission of the offence under s.300(1).

Utility of the injunctions sought by the SFC

77.Mr Chow provided a list of known assets of the Opposing Ds, D8 and D16 in Hong Kong in Appendix 1 annexed to his first affirmation. Such evidence is not disputed.

78.Their assets are composed of case, securities and real assets in Hong Kong and the total value comes to about HK$123 million. The Estimated Loss far exceeds this amount.

79.Ms Lau submits that the injunctions now sought by the SFC has no utility because in any event the Opposing Ds are presently unable to deal with their assets because of the successful enforcement actions taken or prompted by the SFC.

80.First, from 1 December 2020 to 3 September 2024, the Police issued letters of no consent (“LNCs”) to various banks to freeze the cash, securities and insurance accounts of the Opposing Ds and other Ds0 including D8 and D16.

81.On 15 March 2021, the SFC issued restriction notices (“RNs”) to various licensed corporations prohibiting them from disposing of or dealing with the assets in the accounts of D3, D6 and D16.

82.Between 12 October 2021 and 28 October 2022, the Department of Justice applied successfully for restrain orders (“ROs”) covering various bank and brokerage accounts held by D3, D6, D7 and D16.

83.Further, on 6 December 2025, the Opposing Ds wrote to the SFC and offered an undertaking (“the Proposed Undertaking”) to preserve their assets in the following terms:

(1) The Opposing Ds undertake to maintain the value of assets as per the first three paragraphs of the Draft Order appended to the Summons until the end of the trial of the Action.

(2) As exception to the above, the Opposing Ds be allowed to make the following withdrawals:

(a) Ordinary monthly living expenses of HK$195,000 for D1, HK$197,230 for D2 and HK$169,200 for D6;

(b) Additional lump sum withdrawals of HK$3,000,000 for D1, HK$12,195,000 for D2 and HK$785,787.63 for D6 for their legal expenses for the Action, HCA 2066/2024 and two criminal trials and monthly instalments payable to the SFC by D3 as the SFC’s taxed costs (plus interests) in HCAL 177/2022; and

(c) The foregoing legal expenses be withdrawn from the accounts of the Opposing Ds and deposited into the client account of NEO.

84.Ms Lau submits that the Proposed Undertaking should be accepted by the SFC and given the LNCs, ROs and RNs, the SFC should not persist in the Summons.

85.There are three assumptions underlying this submission. First, the Opposing Ds have honestly disclosed all their assets to the SFC. Second, the Opposing Ds would abide by the restrictions in the Proposed Undertaking and there is no risk of dissipation. Third, the proposed withdrawals should be allowed.

86.On the Opposing Ds’ own evidence, there are indeed undisclosed assets. Ms Sit rightly points out the following matters.

87.On D6’s own evidence, she has kept HK$20 million at home for safekeeping and contingency.

88.D1 alleges in his affirmation that due to the various restrictions on his bank accounts, he could only live on his residual savings. It is unknown how he keeps his residual savings and the balance of such savings.

89.D3 avers that he has income from his mini-storage business and that he had investments and more liquid assets than his brother and mother.

90.The following matters show that D1, D3 and D6 do have other financial resources. First, D6 is able to reside at Cluny Park with a benchmark monthly rental of HK$100,000 without the need to pay any rent.

91.D3 also lives in another luxurious property known as Imperial Cullinan, West Kowloon. The registered owner of the property is a local company known as Jumbo Win Development Limited which is owned by a BVI company known as Profit Meet Limited. D3’s wife is the sole director of Profit Meet Limited. The valuation of the property is more than HK$24 million.

92.The investigation of the SFC shows that D3 and D6 were able to purchase landed properties in May and June 2021 after the imposition of the LNCs and RNs.

93.Thus, it is plain that there are undisclosed assets not subject to the LNCs, ROs and RNs.

94.The next issue is whether the Opposing Ds could be trusted that they would abide by the Proposed Undertaking and would not dissipate their undisclosed assets. Ms Sit submits that the risk of dissipation is real.

95.I agree with Ms Sit. The Scheme was elaborated and technical. D1 managed to recruit many nominees to implement the Scheme. The cogent evidence is that D1 has used his brother, his mother and his ex-wife to execute the Scheme with his mother being the biggest winner. The Scheme lasted for more than 2 months. Apart from the dubious transactions, concerted effort was made in the dissemination of positive news about KNT shares at Stage 3. As a result, the Estimate Loss is sizable.

96.Fraud and deception are alleged against D1 and D2. If proven, they would be guilty of a criminal offence of dishonesty. The position of D3 and D6 is no better. They allowed themselves to be used by D1 and took part in the Scheme. They also assisted D1 to deal with the profits made out of the Scheme and they are less than frank in their evidence about their dealings.

97.It can be concluded that all the Opposing Ds are of low commerciality morality. In fact, to them, their trading in KNT shares was not really a commercial activity strictly speaking. It was a means to an end only.

98.On the particular facts of the present case, I am satisfied that a real risk of dissipation on the part of the Opposing Ds and D16 is shown by reason of their low commercial morality.

99.In the absence of an injunction, I accept that there is real risk that the Opposing Ds and D16 cannot be good for damages and their ability to comply with the compensation order sought by the SFC under s.213(8) is in serious doubt.

100.Now I come to what Ms Lau describes as the most critical issue, i.e., provisions to the Opposing Ds for legal costs and living expenses by withdrawals from the preserved assets.

101.In China Metal Recycling (Holdings) Ltd (In Provisional Liquidation) & Anor. v Chun Chi Wai & Ors (unreported, HCA 1412/2013, 28.2.2014), Recorder Houghton SC pointed out that the court is entitled to expect a defendant seeking leave to use the frozen assets in an existing Mareva injunction for their legal and living expenses to adduce credible evidence as to his other assets. The evidential and persuasive burden lies firmly on the defendant (§§26 and 28).

102.In the present case, the Opposing Ds clearly fail to discharge the burden. I do not think that I have sufficient information to decide on the adequacy of the provisions sought. I agree with Ms Sit that there is simply no basis for this court to allow any withdrawals from their assets to be frozen at this stage in the absence of reliable evidence of the quantum of their assets.

103.In the premises, the Proposed Undertaking cannot serve the purpose and the SFC has good reasons to reject the same.

104.Whilst the risk that any compensatory order sought by the SFC cannot be fully complied with is real, the SFC agrees that the Opposing Ds could have some provisions for their legal and living expenses in the draft order. Should the Opposing Ds make a full disclosure of their assets and adduce credible evidence of their genuine financial needs pending trial, they could certainly make an application for a variation of the injunctions to be granted against them. I come to the conclusion that the balance of convenience is in favour of a grant of the injunctions.

105.There are other minor grounds advanced by Ms Lau and I believe I could dispose of them briefly. First, there is a complaint about oppression and delay.

106.It is submitted that the Opposing Ds would bear the risk of exposing their defence in the mirroring criminal proceedings under DCCC 778/2024 at a premature stage. The Opposing Ds further indicate that they are considering a stay application in due course.

107.There is no merit in this complaint. As rightly pointed out by Ms Sit, the Opposing Ds do not have any qualms about setting out their versions of events to oppose the Summons.

108.Further, I am unable to agree that the present action only serves as an insurance for the criminal proceedings. This Action has its own utility and function and there is no issue of duplicity. The interlocutory injunctions sought are to ensure that any compensatory and restoration orders granted in the Action would not be rendered nugatory.

109.I also reject the contention that the current RNs, ROs and LNCs are sufficient. I agree with Ms Sit that they have different thresholds and serve different purposes. Most importantly, they do not cover the assets which the Opposing Ds are yet to disclose. These restrictions could not negate the necessity of the injunctions sought by the SFC.

110.In the circumstances, I am unable to accept that the present application is oppressive in any way.

111.Moreover, the Opposing Ds complain about delay.

112.Ms Sit pertinently refers to Convoy Collateral Ltd v Cho Kwai Chee & Ors. [2020] 6 HKC 81. There, Lam VP (as Lam PJ then was), at §78, observed that it is clear from the authorities that delay per se would not necessarily bar relief and the ultimate question is still whether the plaintiff could show a real risk of dissipation despite delay.

113.In light of the risk of dissipation accepted by this court, the SFC should not be deprived of the interim protection in my view. In particular, I accept the explanation for the delay proffered by Mr Chow in his affirmation. Very understandably, it took time for the SFC to investigate the Scheme given its complexity and large volume of documents and data involved. The SFC also required expert assistance in this matter. I am of the view that there is no culpable delay which justifies a denial of interim protection against a real risk of dissipation.

114.Lastly, I reject the contention of the Opposing Ds that the SFC should provide cross-undertaking as to damages. There are ample authorities against an order for cross-undertaking to be imposed on a public authority bringing proceedings to enforce the law for the public benefit.

115.In Financial Services Authority v Sinaloa Gold plc and ors (Barclays Bank plc intervening) [2013] 2 AC 28, the House of Lords considered whether Financial Services Authority should be ordered to give a cross-undertaking when it was acting under its express power to seek injunctive relief conferred by s.380(3) of the Financial Services and Markets Act 2000. At §38, Lord Mance held that there would be an apparent imbalance if the authority were required to accept potential liability under a cross-undertaking when it addressed the activities of unauthorised persons and had therefore to seek the court’s endorsement of its stance in order for a freezing order to issue.

116.In Securities and Futures Commission v A [2008] 1 HKC 89, Kwan J (as she then was) found that the SFC was exercising the function of law enforcer in the public interest and indeed had a duty to enforce the law under its statutory powers. The learned judge considered that the purpose of the injunction sought was not for the protection of a proprietary right but had more resemblance to the function of prosecuting those who are alleged to have committed an offence. On this basis, the learned judge refuse to order an undertaking in damages for granting the interim injunction pursuant to s.213.

117.I reach the same conclusion in the present case and I decline to order any cross-undertaking in damages.

118.I believe that I have given sufficient reasons for my decision. Whilst I have not expressly dealt with all the opposition grounds here, I have considered them and none of them could cause me any concern about the merit of the present application.

Conclusion and orders

119.For the reasons given, I accede to the application of the SFC. I have perused the revised draft order and I believe that the terms therein are appropriate. I make an order in terms of the draft order as against the Opposing Ds and D16.

120.There is no reason why costs should not follow the event. None of the grounds of opposition is invalid and the Summons should not have been contested. I make an order nisi that costs of and occasioned by the Summons be paid by the Opposing Ds and D16 to SFC, to be taxed if not agreed.

121.Last but not least, I thank Ms Sit, Ms Lau and Mr Chow for their able assistance.

Ms Eva Sit SC, instructed by Securities and Future Commission, for the Plaintiff

Ms. Queenie Lau SC and Mr. Tony C H Chow (absent on 22 December 2025), instructed by Messrs Neo Solicitors LLP, for the 1^st, 3^rd and 6^th Defendants

The 16^th Defendant was not represented and did not appear