Brokers claim to be dupes of huge share-trade scam

PUBLISHED : Wednesday, 23 September, 1998, 12:00am
UPDATED : Wednesday, 23 September, 1998, 12:00am

Several stock brokers claiming to be victims of an alleged share scam involving trading in the shares of property investor Chi Cheung Investment are believed to have lodged formal complaints with the police yesterday.

However, sources said the Securities and Futures Commission might now handle the complaints because there was insufficient evidence for the police to pursue them.

The victim brokers are understood to include CEF Brokerage, partly owned by Cheung Kong (Holdings) chairman Li Ka-shing, Pacific Challenge Securities, Kim Eng Securities, Worldsec Securities and Dresdner Kleinwort Benson Securities Asia.

Sources said the brokers' problems arose last Tuesday when an unidentified investor bought Chi Cheung shares in bulk through the brokers in purchases which pushed the share price up to about $7.

The investor then failed to settle the purchases on Thursday last week, which triggered a free fall in the shares the following day as the brokers scrambled to recoup their money by dumping the shares they had bought.

Rumours suggest the purchases were part of a plot devised by the investor, who already held a stake in the company and wanted to off-load it at a higher price.

He is believed to have attempted to push the price up with his buys and then tried to sell his existing stake through a different broker.

Pacific Challenge managing director Brenda Lui Yee-man confirmed yesterday that the investor had yet to pay the brokerage for the shares bought.

'We'll definitely be writing to the investor and asking for a payment,' she said. She would not disclose the identity of the investor, who is believed to have used a company account to make the buy orders.

Ms Lui said Pacific Challenge's exposure was limited and would not derail its upcoming $70 million listing on the stock exchange.

Losses by the brokers may run as high as $100 million. CEF is understood to have suffered most, with losses of at least $10 million. No CEF executives were available for comment yesterday.

Trading in Chi Cheung has been frozen since Friday afternoon after the shares plunged 86.5 per cent to 83 cents that morning.

Securities clearing house Hongkong Clearing confirmed it had received complaints about the non-payments but had relayed them to the stock exchange.

The stock exchange said it was 'following up' while the SFC said it would not comment on individual cases.


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