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Court orders boiler room fraudsters to compensate investors

Issue date: 2021-06-03 17:17:58

The Court of First Instance has granted orders sought by the Securities and Futures Commission (SFC) against boiler room fraudsters to compensate 75 investors who fell victim to the scams following legal proceedings under section 213 of the Securities and Futures Ordinance (SFO) (Notes 1 & 2).

The boiler room scams involved three unlicensed entities purportedly based in and operating from Hong Kong.  They are: (i) Broadspan Securities (Broadspan) using the website www.broadspansecurities.com; (ii) Shepherds Hill Partners, Hong Kong (Shepherds Hill) using the website www.shepherdshillhk.com; and (iii) Rich Futures (HK) Limited (Rich Futures) using the website www.richfutureshk.com.

The three unlicensed entities solicited investors through cold calls to open trading accounts via their websites and to invest in securities and/or futures in 2014.  They also asked investors to deposit funds purportedly for their investments into six bank accounts in Hong Kong (Note 3).

It emerged that none of the investments in securities and/or futures products agreed with the investors were ever executed on any recognised exchange, nor have these investors been able to recover any of their monies (Note 4).

In December 2014, the SFC obtained interim injunctions to freeze the monies in the six bank accounts holding the proceeds of boiler room or unlicensed activities allegedly carried out by Broadspan, Shepherds Hill and Rich Futures (Note 5).  The SFC also obtained orders restraining them from carrying on unlicensed activities and to suspend their websites in January 2015 (Note 6).

The Court has appointed administrators to receive and distribute the proceeds of the boiler rooms frauds remaining in the six bank accounts – approximately a sum of $4.3 million – for the benefit of the investors on a pro rata basis (Notes 7 to 9).

End

Notes:

1. A “boiler room” is a securities fraud in which fraudsters purport to operate as a licensed securities or futures broker and offer to trade shares or futures that are fictitious (in the sense that the securities contracts for which they have paid for have not been executed on any stock exchange) to people whom they cold-call.
2. The judgments are available on the Judiciary’s website (Court Reference: HCA 2511, 2512, 2513/2014).
3. The bank accounts were held by six entities: Timeprime Limited (Timeprime); Lynwin Limited (Lynwin); Resmart Limited (Resmart); Fieldmark Corporation Limited (Company No. 2010793) (Fieldmark); DH Corporation Limited (DH); SMD Partnership Limited (SMD).
4. Some of the investors had been induced by other unlicensed entitles to invest in securities and/or futures products and instructed to deposit funds into bank accounts mentioned in Note (3).  These entitles were purportedly based in and operated from various places, including but not limited to Beijing, New York, London and Tokyo.
5. Please see the SFC’s press release dated 19 December 2014.
6. Please see the SFC’s press release dated 7 January 2015.
7. The administrators are Mr Cliff Tsui and Mr Leonard Chan of Ernst & Young Transactions Limited.
8. On 12 May 2021, the Court granted judgments in default of defence against the defendants and made declarations that Broadspan, Shepherds Hill and Rich Futures had contravened sections 109, 114 and 300 of the SFO for (i) issuing advertisements in which they held themselves out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered; (ii) holding themselves out as carrying on business in regulated activities whilst unlicensed and unauthorised; and (iii) employing a device, scheme or artifice with intent to defraud or deceive and/or engaged in an act, practice or course of business which was fraudulent or deceptive or would operate as a fraud or deception.
9. The Court also made declarations that by receiving the funds from the investors, Timeprime, Lynwin, Resmart, Fieldmark, DH and SMD had aided, abetted or otherwise assisted, counselled or procured or conspired with Broadspan, Shepherds Hill and Rich Futures in their contraventions, or alternatively, directly or indirectly have been in any way knowingly involved in the 1st Defendants’ contraventions of the SFO.

Source: SFC