Bid to freeze Tiger cash rejected
A Hong Kong court has rejected a Securities and Futures Commission bid to freeze HK$38.5 million worth in assets belonging to the US hedge fund Tiger Asia Management and its three executives, marking a setback for the financial markets watchdog.
High Court Judge Jonathan Harris concluded in a written judgement yesterday that his court did not have jurisdiction to determine whether the hedge fund and its three executives - its founder, Bill Hwang Sung-kook, managing director and head of trading Raymond Park, and trader William Tomita - had engaged in insider dealing or market manipulation, as alleged by the SFC. He said that a guilty verdict first had to be established by either the Market Misconduct Tribunal or a criminal court before he could grant a court order to freeze the money under section 213 of the Securities and Futures Ordinance.
Senior Counsel Simon Westbrook, representing the commission, had told the judge the SFC 'thought that this was a clear case of insider dealing that should be prosecuted, but as the defendants (Hwang, Park and Tomita) are in New York this was not possible'.
Judge Harris wrote: 'I would have thought any prospect of the three hedge fund managers passing through Hong Kong and risking prosecution is more than remote.'
Section 213 allows the SFC to apply for a court order to freeze defendants' money equal to the sum they are alleged to have earned from insider dealing or market manipulation to make sure money is available to compensate investors if they are found guilty.
The SFC has decided to appeal. 'The SFC challenges the correctness of this court decision and intends to appeal,' the commission said in a statement after the verdict.
The SFC in April last year applied for a court order to freeze the money, and to ban Tiger Asia from trading in the local market, alleging that the US hedge fund and the three executives had committed insider dealing and market manipulation in 2008 and 2009. Under Hong Kong law, insider dealing - using price-sensitive information to trade shares to gain profit or avoid losses - is a criminal offence.
Tiger Asia, which specialises in equity investments, was founded by Hwang in 2001 and is one of the so-called 'tiger cubs' - hedge funds based in New York and founded by managers who worked under Julian Robertson at Tiger Management.
The SFC investigation claimed that Tiger Asia had sold short 93 million shares in China Construction Bank after having been approached to take part in a placement of the bank's shares in January 2009.
The commission also alleged that the hedge fund sold short 104 million Bank of China shares after it was invited to participate in two placements of Bank of China shares by UBS in December 2008 and by Royal Bank of Scotland in January 2009.
Short-selling is the practice of making a profit by selling a security in the expectation it can be bought back at a lower price. The hedge fund allegedly knew the placements would lead to a fall in the share price of the banks in question.
The sum, in Hong Kong dollars, that the Securities and Futures Commission wants frozen in Tiger Asia's accounts