Articles: Enigma Network

Listing Committee censures Mr Xiang Liang, ex-CEEI (0986)
SEHK, 20-Sep-2019
CEEI is a member of the "Enigma Network". Mr Xiang had agreed to be criticised and to undertake 24 hours of training on the Listing Rules, but he resigned 11 days after the announcement of the sanctions, and then failed to do the training. Perhaps he plans never to return to the public markets.
4 charged with conspiracy to defraud over bonds placement of Convoy (1019)SFC announcement
ICAC, 22-Jul-2019
Allegedly, over a 3.5 year period, Convoy Investment Services (CIS), in which Mark Mak Kwong Yiu and 2 other EDs of Convoy held substantial shareholdings, acted as a hidden connected placing agent for bond issues, using Gransing Securities as a front. We note that in 2015, CIS applied for a listing on GEM which lapsed. It was then a partial subsidiary of a BVI company which was 35.06% owned by Quincy Wong Lee Man, 29.62% by Mr Mak and 20.71% by Shin Kin Man, Wong and Shin, both EDs of Convoy, are not charged today.
Christie Chan Lai Yee & Byron Tan Ye Kai charged with conspiracy to defraudSFC announcement
ICAC, 22-Jul-2019
Slowly but not surely, the Enigma Network is being decoded. Co-conspirator Roy Cho Kwai Chee was charged in the same matter on 16-May. Ms Chan is an ED (duties suspended since 8-Dec-2017) of Convoy (1019). Mr Tan resigned as an ED on 6-Jan-2018. Ms Chan faces a charge in a separate case announced today.
Hong Kong sees first 'Enigma' stock fraud charge of many to come, 17-May-2019
Gransing Securities chair Rowena Oei Hong Eng suspended for 8 months
SFC, 16-May-2019
Gransing is one of the brokerages in what we call the "Enigma Network", having acted as placing agent for many of its listed companies. The firm was co-founded by Ms Oei and her husband Gerald Que Bon Tan. It is 17.52% owned by China New Economy Fund (0080), a network company. The CNEF accounts state that Gransing Financial Group Ltd (including the brokerage) had an unaudited loss of HK$20.7m in 2018. Ms Oei admitted that she dishonestly crossed orders with an unnamed friend at another firm in 2 stocks (not in the network).
Roy Cho Kwai Chee charged with conspiracy to defraud Convoy (1019)SFC announcement
ICAC, 16-May-2019
2 years and 1 day after we published the "Enigma Network" report, the first charge is brought, relating to a relatively small and previously-unannounced acquisition by Convoy. 55% of the target was owned by Mr Cho. The ICAC alleges that he owned "50% shareholdings" in Convoy. He was not a disclosed shareholder, so to prove this, they will need to show that he was pulling the strings of numerous listed companies in the network which held the stock. Two co-conspirators are unnamed. We wait to see the rest of the iceberg.
The spectacular implosion of Dr. Cho's 'nefarious network'The Enigma Network
Bloomberg, 15-May-2019
Today is the 2nd anniversary of Webb-site's publication of the Enigma Network. So far, nobody has been charged with any offence, and no SFC action has been taken to bring in the liquidators to wind up any of the listed companies involved.
Enigma fallout: the social media fund
We piece together disclosures by 4 listed companies in the Enigma Network to reveal a pseudo-fund which held a single 55% stake in a social media company, posing new questions for the regulators. (28-Apr-2019)
Ninotre Investment Ltd & Xiao Qingmin v L & A (8195)
HK Court of First Instance, 14-Nov-2018
The plaintiffs win an order for discovery in relation to L&A's purchase of 47.63% of Red 5 Studios Inc. on 28-Apr-2016, The first plaintiff is a 100% subsidiary of Unity (0913). The 2nd was an ED of Suncorp (1063) until 23-Nov-2015. Unity and Suncorp both featured in our "Enigma Network" of 2017. L&A was a bubble we warned about in Sep-2015. During 2015, Unity bought 2.81% of L&A in the market for HK$117.509m, a split-adjusted $4.18/share. The stock crashed on 6-Jul-2016 and is now at $0.035.
ICAC searches Town Health (3886) offices again
ICAC, 23-Aug-2018
The first raid was on 9-Feb-2018, jointly with the SFC. This time the ICAC is interested in the "office or workplace occupied by a person". Town Health is in the "Enigma Network" revealed by Webb-site in May 2017.
Censure of Mr Gangkhuyag Chultemsuren, ex-IR Resources (8186)
SEHK, 31-May-2018
For failing to co-operate with an investigation. He resigned on 14-May-2015. IR Resources featured in our "Enigma Network" last year.
Universe (1046), Enigma Network member, shuts down its brokerage following the "June Incident"
Company announcement, 17-May-2018
Capital VC (2324) terminates placing
Company announcement, 27-Apr-2018
This follows a complaint by Webb-site to the SFC on 2-Feb-2018 regarding the 84.9% discount of the placing price to net asset value per share of this closed-end investment company, and 3 subsequent extensions of the completion date. The termination announcement fails to state what "conditions precedent" have not been fulfilled, but the only disclosed condition in the placing announcement was listing approval for the new shares.
Capital VC (2324) cancels grant of options
Company announcement, 15-Feb-2018
This follows a complaint by Webb-site to the SFC on 2-Feb-2018, noting that the exercise price of the options was an 82.5% discount to net asset value. No reasons are given for the cancellation. Capital VC is a member of what we call the "Enigma Network".
ICAC and SFC raided Town Health (3886) offices on 9-Feb
Company announcement, 13-Feb-2018
Comment: this is another step forward in the investigation of the "Enigma Network" which Webb-site first exposed last year.
Capital VC (2324) dilutes holders againOptions announcement
Company announcement, 2-Feb-2018
The "Enigma Network" investment company is blowing the general mandate, issuing 19.96% new shares at $0.05, not mentioning the 84.9% discount to Net Asset Value of $0.3308 at 31-Dec-2017. The board claims the issue is "in the interests of the Company and the Shareholders as a whole". The placing agent, Infast Brokerage, is 95% owned by GCPS (8193), another Enigma member. 3 minutes eariler, Capital VC announced a grant of 275m options at $0.058 to unnamed persons. That's another potential 10% enlargement of the share base at an 82.5% discount to NAV. We call on the SFC to direct the Stock Exchange to reject the listing application for all the new shares.
Convoy (1019) sues 4 more
Company announcement, 27-Dec-2017
Jun Yang (0397) details and denies allegations in Convoy (1019) writ
Company announcement, 20-Dec-2017
China Green (0904): more details of Convoy suit
Company announcement, 20-Dec-2017
Convoy sues 28 over fund transfers
HK Standard, 20-Dec-2017
China Green (0904) sued by Convoy (1019)
Company announcement, 19-Dec-2017
HK Education (1082) sued by Convoy (1019)
Company announcement, 19-Dec-2017
War breaks out in the Enigma Network. Convoy now says that in a massive placing in 2015, it provided margin financing for HK Education to take up shares, so Convoy was in effect financing the subscription of its own shares.
IECCT (8081) sued by Convoy
Company announcement, 19-Dec-2017
Webb-site upgrades CCASS Analysis, spotlights share pledges
New features in the Webb-site CCASS Analysis System (WCAS) allow investors and regulators to see the largest daily CCASS movements across the market and the history of large moves in each stock and by each broker. Movements of large blocks into CCASS or between brokers without a corresponding transaction often indicate a pledging of shares for loans, which are not disclosed due to inadequate law and Listing Rules. (19-Dec-2017)
'Enigma Network' directors, shareholders sued in HK court
Bloomberg, 19-Dec-2017
Webb on "The Pulse" re the Enigma Network (video)
RTHK, 16-Dec-2017
Convoy (1019): 3 EDs arrested
Company announcement, 8-Dec-2017
Another listed firm drawn into graft probe net
RTHK, 8-Dec-2017
Convoy (1019): we are assisting an investigation involving two EDs
ICAC, 8-Dec-2017
Executives arrested as HK intensifies 'Enigma Network' probe
Bloomberg, 8-Dec-2017
Lerado (1225): we were invited to assist the ICAC
Company announcement, 8-Dec-2017
ICAC response statement
ICAC, 7-Dec-2017
This confirms that the ICAC and the SFC are working together and searched 8 premises. The ICAC has arrested 3 listed company executives for suspected corruption. Comment: these are likely further steps in the investigation of the "Enigma Network" that Webb-site revealed last May.
SFC suspends China Wah Yan Healthcare (0648)
SEHK, 27-Nov-2017
Another member of the Enigma Network. 4 of the 50 stocks have now been suspended by the SFC. This follows First Credit Finance (8215) on 24-Nov-2017, New Ray Medicine (6108) on 6-Oct-2017 and Lerado (1225) on 6-Jun-2017.
SFC suspends Town Health (3886)
SEHK, 27-Nov-2017
That's 2 today, and 5 of the 50 stocks in our "Enigma Network" are now suspended by the SFC. Town Health is the biggest yet, with a market cap of HK$5.19bn. It is a member of the Hang Seng Mid-Cap Index.
SFC suspends First Credit Finance (8215) - another member of the Enigma Network
SEHK, 24-Nov-2017
HK Education (1082): directors disappointed
Company announcement, 3-Nov-2017
The company says the purported board meeting to appoint Kevin Ng King Wai and Chan Kwan Yiu was invalid for failure to give proper notice to all members of the Board. Happiness breaks out at a member of the "Engima Network".
'Enigma Network' crash spurs HK's largest financial raidThe Enigma Network
Bloomberg, 13-Oct-2017
SFC directs suspension of New Ray Medicine (6108)Enigma Network
Company announcement, 6-Oct-2017
This was one of the 50 stocks not to own in our "Enigma Network" published on 15-May-2017.
Criticism of CEEI (0986), Chen Tong (Chairman & CEO) and Xiang Liang (ED)
SEHK, 29-Sep-2017
CEEI is in what we call the "Enigma Network". When the investment in Luen Wong (8217) was announced, Webb-site called it a bubble stock trading on a P/B of 321 and a P/E of 861. CEEI said the deal was "fair and reasonable", "a good investment opportunity" and "an attractive investment which will provide satisfactory return". It subsequently crashed, of course. We pointed out the breach of the Listing Rules, for which the company and its directors have now been criticised by the Listing Committee. There was no criticism of the bullish statements made by the CEEI board about Luen Wong.
China Jicheng (1027) Chairman cuts stake after Enigma Network meltdown
Company announcement, 3-Jul-2017
Huang Wenji cut his stake from 74.48% to 66.25%, selling 8.23% at an average $0.0115 per share, a loss of 95.9% since last Monday (26-Jun-2017), but still almost double the net assets per share of $0.0064. No word on whether any of his shares were pledged. The announcement contains a probable error - if he sold 4.01% on Friday, that is about 3,008m shares, not 30,008m shares. Total proceeds for the 2 days were about HK$71m
WLS (8021) dumps QPL (0243) after Enigma Network meltdownCCASS changes
Company announcement, 3-Jul-2017
The 3.92% holding in QPL had not previously been disclosed. The average sale price was $0.2068.
Jia Meng (8101) sells Luen Wong (8217) after Enigma meltdown
Company announcement, 30-Jun-2017
The average sale price was $0.97. The shares represented 36.9% of JM's net assets at 31-Mar-2017, when the market price was $19.00.
Illegal short sales under scrutiny in HK's 'Enigma' Crash
Bloomberg, 30-Jun-2017
If Charles Li has any evidence of this, he should produce it. To us, this looks like an attempt to deflect the blame from the systemic failure of the for-profit regulator, HKEX, to produce and enforce adequate governance provisions in the Listing Rules. HKEX should no longer be a regulator.
CEEI (0986) dumps Luen Wong (8217) on day 2 of Enigma Network meltdown
Company announcement, 29-Jun-2017
Proceeds were $18.66m, or $1.046 per share. CEEI bought the shares on 20-Jul-2016 at an average $6.977 per share. At the time, CEEI said that Luen Wong was "a good investment opportunity" and "an attractive investment which will provide satisfactory return". As we said at the time, the Price/Book ratio was 321 and the P/E was 861. How could any reasonable board make such statements?
HK small cap stocks and the 'Enigma Network'
CNBC, 29-Jun-2017
Lerado (1225) dumps China Jicheng (1027)
Company announcement, 28-Jun-2017
The average sale price of $0.0169 is less than the market average of $0.0188 in yesterday's collapse of the Enigma Network.
CNC (0745) dumps China Jicheng (1027) in Enigma Network meltdown
Company announcement, 28-Jun-2017
The sale was at an average price of $0.0214, better than Lerado's $0.0169 and better than the market average $0.0188.
‘Enigma Network’ rocks Hong Kong markets with sudden 90% losses
Bloomberg, 28-Jun-2017
QPL (0243) dumps 3 stocks in Enigma Network meltdown
Company announcement, 27-Jun-2017
We knew they had shares in GCPS (8193), but this announcement also reveals holdings in Major (1389) and China Jicheng (1027). The CJ shares were sold at an average $0.0275, better than Lerado's $0.0169 and CNC's $0.0214.
Lerado (1225): SFC minded to suspend stock from 6-Jun-2017
Company announcement, 5-Jun-2017
At last, some action from the SFC. Nearly 2 years after Lerado hit the market with a highly dilutive deep-discount open offer (followed by a deep-discount rights issue 10 months later), it appears to the SFC that the circular dated 26-Oct-2015 included "materially false, incomplete or misleading information". Since the open offer was announced, the total return on the stock has been -90.77%. The SFC is presumably planning further action. Lerado is a member of what Webb-site calls the "Enigma Network".
Hanison (0896) may buy 21/F of Kings Wing Plaza, Shatin
Company announcement, 1-Jun-2017
The vendors and their owners are unnamed, but we can tell you that they are HKEI (1082), which owns 60%, and Finsoft (8018) which owns 40%. 2 weeks ago, Hanison signed MoUs to buy 20/F from Convoy (1019) and 22/F from Town Health (3886), so this completes the penthouse triplex. All 4 vendors are in what we call the "Enigma Network".
Hanison (0896) may buy 20/F, 22/F of Kings Wing Plaza, Shatin
Company announcement, 17-May-2017
The vendors are not identified, but we'll tell you that 20/F is owned by Convoy (1019) which bought it for HK$107.4m in Jan-2015, and 22/F (top floor) is owned by Town Health (3886) which acquired Faithful Sun Ltd in 2016. Both vendors are in what we call the "Enigma Network". The price is about HK$10k per gross sq ft, and quite sensibly, Hanison is buying companies which own the properties to legally avoid 8.5% double stamp duty. The 21/F in the sandwich is owned by Ultimate Elite Investments Ltd, which is 60% owned by HKEI (1082) and 40% by Finsoft (8018), two other members of the Enigma Network.
The Enigma Network: 50 stocks not to own
Sometimes, all you need to tell a story is a picture. (15-May-2017)

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