8 months' jail for man who cheated bank of $3m loan meant for share financing
As a favour, a man allowed his childhood friend to use his share financing account to get loans from a bank to trade shares.
Joel Aloysius Choy, 37, signed several documents that falsely indicated he had control over the account, while his friend, Justin Goh Hanshi, 35, was using the account to manipulate the price of a company's shares.
As a result of Goh's scheme, the Bank of East Asia (BEA) was deceived into disbursing more than $3,050,000 in loans into Choy's share financing account.
On Monday (Feb 7), Choy was sentenced to eight months' jail for cheating. Another similar charge was taken into consideration for his sentencing.
Goh's case is still before the courts.
A share financing facility is a loan offered by a bank, which is secured by securities. The account holder can use the loans disbursed by the bank to buy more securities, which are also pledged in an account with the bank as collateral for the loan.
Around November 2012, BEA offered share financing facilities but with a limit on how much an individual could borrow.
Goh used Choy's account to circumvent the loan limit and used the loans to purchase Sky One Holdings shares and manipulated its price.
Sky One's shares were listed on the Catalist board of the Singapore Exchange. The company provided logistics services including express land transport, international airfreight and packaging services.
Sometime in 2012, Goh asked Choy to apply for a share financing account with BEA so he could use the loans for his personal trading. He told Choy he would transfer certain shares to Choy for him to pledge to BEA as security for the loans.
Around Nov 7, 2012, on Goh's instructions, Choy signed an agreement which purported that he had bought 6,000,000 Sky One shares at $0.31 per share when he had not paid for these shares.
The shares were transferred to Choy's Central Depository Account five days later.
On Nov 23, Choy completed an application form for share financing and told a relationship manager from BEA that he had 6,000,000 Sky One shares.
BEA later gave Choy a letter of offer for the share financing facility of $3 million, which Choy signed.
He made false representations to BEA that he had control over the account and that he was the beneficial owner of the account and shares pledged.
BEA disbursed a total of $3,054,522 to Choy's account.
On Oct 28, 2013, Sky One's shares opened at $0.46 and plunged to $0.043 at about 10.50am, triggering a margin call by BEA as the value of the Sky One shares pledged in the account was not enough to cover the amounts disbursed by BEA under the facility.
A total of $474,784.91 remained unpaid to BEA as at Jan 23, 2014.
To date, Choy has paid $260,865.28 to his bankruptcy estate, through the sale of his matrimonial home and monthly contributions of $300.
Choy was represented by lawyer Josephine Chee from Rajah & Tann, who urged the court for a four-month jail term since her client had misplaced his trust in a childhood friend and had no knowledge of Goh's scheme.
Deputy Public Prosecutors Suhas Malhotra and Sarah Thaker urged the court for nine months' jail, noting that it was an aggravating factor that a financial institution had been deceived.
DPP Suhas said: "Such offences undermine public confidence in the financial industry and adversely affect the economic infrastructure."
For cheating, Choy could have been jailed for up to three years, fined or both.
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