Citigroup has been reprimanded by Hong Kong's securities regulator for failing to notice that one of its former private bankers operated a Ponzi scheme for five years.
The Securities and Futures Commission (SFC) has fined the bank's regional branch, Citi Asia, HK$6 million and suspended the license of managing director Lisa Chan Sin-man, who directly supervised alleged Ponzi banker Ramesh Sadhwani.
The SFC announced yesterday that the scheme was operational between 2004-2009. Sadhwani, who fled Hong Kong over two years ago, often targeted Indian investors based in Hong Kong, including pensioners, according to three former clients.
'Citi not only failed to detect a Ponzi scheme operating under its nose, despite having the opportunity to do so, but then failed to report the scheme to the SFC in a timely way,' said Mark Steward, the regulator's director of enforcement.
The SFC statement referred to the Ponzi scheme operator only as 'Mr X', though it did name Lisa Chan.
Two independent sources confirmed the announcement concerned Sadhwani. Documents seen by the South China Morning Post also confirm Sadhwani was directly supervised by Chan.
'I am happy some justice has been done,' said Deepak Sureka, a 75-year-old Hong Kong resident who believes he lost US$700,000 after investing with Sadhwani. 'Citi deserved the reprimand.'