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SFC commences legal proceedings against FingerTango Inc. and its current and former directors

Issue date: 2023-10-06 17:44:52

The Securities and Futures Commission (SFC) has commenced legal proceedings in the Court of First Instance (CFI) to seek disqualification orders against eight current or former directors of FingerTango Inc. (FingerTango) and a compensation order against six of them for allegedly committing corporate misconduct and breaching their duties towards FingerTango.

The SFC is also seeking a court order for FingerTango to appoint an independent external auditor to review and prepare a report on its internal control procedures to ensure that FingerTango complies with all relevant rules and regulations in Hong Kong (Notes 1 & 2).

The nine respondents named in the SFC’s legal proceedings are: (i) FingerTango; (ii) Mr Liu Jie , chairman, chief executive officer and executive director (ED); (iii) Mr Wang Zaicheng, former ED and joint company secretary; (iv) Mr Liu Zhanxi, former ED and chief financial officer; (v) Mr Zhu Yanbin, former ED and chief operating officer; (vi) Mr Wu Junjie, former ED and vice president; (vii)-(ix) Mr Guo Jingdou, Ms Yao Minru and Mr Du Geyang, former independent non-executive directors (Note 3).

The SFC’s legal action follows an investigation which found that the eight current or former directors had breached their fiduciary duties to act in good faith and in the best interests of the company and failed to exercise reasonable care, skill and diligence to protect FingerTango’s interests.  Shortly after listing, the directors caused FingerTango to use proceeds from its initial public offering to invest $450 million in a fund without conducting proper due diligence about the fund such as its track record and portfolio.  FingerTango partially redeemed the fund in December 2019, and immediately invested another $250 million in loan notes issued by a small-scale private company, which subsequently defaulted and led FingerTango to suffer a loss and damage of $258.75 million, including the accrued interest.

The SFC alleges that the loss and damage suffered by FingerTango was caused by the breaches of the duties towards FingerTango on the part of Liu Jie, Wang, Liu Zhangxi, Zhu, Guo and Yao.  Specifically, they failed to carry out proper due inquiries into the loan notes issuer and assessed the risks involved in the investment.  They are liable to compensate the losses suffered by FingerTango.

The SFC has issued restriction notices to three brokers prohibiting them from dealing with or processing certain assets held in accounts which are beneficially owned by Liu Jie, Wang and Zhu, so that there will be funds available for them to pay compensation to FingerTango if so ordered by the court (Note 4).

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Notes:

1. FingerTango’s shares have been listed on The Stock Exchange of Hong Kong Limited since 12 July 2018.  FingerTango and its subsidiaries are principally engaged in the mobile game operation and publishing business in the Mainland.
2. The legal proceedings were commenced under section 214 of the Securities and Futures Ordinance (SFO).  Under section 214 of the SFO, the court may, among other things, make orders to disqualify a person from being a director or being involved, directly or indirectly, in the management of any corporation for a period of up to 15 years, if the person is found to be wholly or partly responsible for the company’s affairs having been conducted in a manner, amongst other conduct, involving defalcation, fraud, misfeasance or other misconduct towards the company or its members.  The court may also make any other order it considers appropriate.
3. Except Liu Jie who is a current director, the other seven individual respondents have resigned from FingerTango and are residing in the Mainland.  The SFC will apply for leave from the CFI to serve the petition relating to the proceedings to them in the Mainland.
4. For further details, please refer to the SFC’s press release dated 17 April 2023.

News captured as of:2023-10-06 17:44:52

Source: SFC