Hedge fund manager Jonathan Iu ordered to disgorge HK$5.6m profit from false trading, disqualified for 4 years

Not in the press release: the profit was in his Mum's account, with no evidence that it flowed back to Mr Iu. The SFC submitted that the MMT could not order disgorgement against Iu as this would be a criminal penalty in a civil case, but MMT Chair Ian McWalters ruled that the law allows it. Iu is now in the UK and claims poverty, so will likely never pay. The MMT is highly critical of the nearly 10-year timeframe for concluding the case, and lays out the internal procedure in detail.

Further information

MMT report

Hedge fund manager ordered to disgorge $5.6 million illicit profit from false trading and disqualified for four years

Issue date: 2024-07-03 18:30:00

The Market Misconduct Tribunal (MMT) has ordered Mr Jonathan Dominic Iu Wai Ching, a former responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), to disgorge illicit profit of over $5.6 million from false trading and disqualified him for four years following legal proceedings brought by the Securities and Futures Commission (SFC) (Note 1).

On 22 trading days between August and September 2014, Iu placed contemporaneous orders in the shares of Sinopharm Tech Holdings Limited and Quantum Thinking Limited through the brokerage accounts of the hedge fund managed by Tarascon and of his mother, leading to opposing orders to be executed against each other. These matched trades, which had the effect of creating a false or misleading appearance of active trading, or with respect to the price for dealings, in the listed shares, resulted in gains of $5.6 million in his mother’s brokerage account at the expense of the hedge fund (Note 2).

At the material time, Iu, who was responsible for managing and making investment decision for the hedge fund, was also a director, the chief investment officer, and a substantial shareholder of Tarascon.

The MMT made the following orders against Iu (Note 3):

End

Notes:

  1. Please see the SFC’s press release dated 16 August 2022.
  2. The two companies are listed on GEM of the Stock Exchange of Hong Kong Limited. At the material time, Sinopharm Tech Holdings Limited was known as China Vanguard Group Limited, and Quantum Thinking Limited was known as Yunbo Digital Synergy Group Limited.
  3. The MMT’s decision and a report which sets out the reasons of making the relevant orders is available on the MMT’s website.
  4. Under section 257(1)(a) of the Securities and Futures Ordinance (SFO), an order prohibiting a person to take part in the management of any listed or unlisted company in Hong Kong without the leave of the Court of First Instance.
  5. Under section 257(1)(b) of SFO, an order has the effect of prohibiting a person who is the subject of the order from any dealings, directly or indirectly, in the Hong Kong financial market for the length of the order.
  6. Under section 257(1)(c) of the SFO, an order to prohibit a person who is the subject of the order not to engage in any form of market misconduct in future.
  7. Under section 257(1)(d) of the SFO, an order that the person shall pay to the Government an amount not exceeding the amount of any profit gained or loss avoided by the person as a result of the market misconduct in question.
  8. Under sections 257(1)(e) and (f) of the SFO, orders that a person shall pay to the Government and the SFC for the costs and expenses reasonably incurred.
News captured as of:2024-07-03 18:30:00

Source: SFC

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