The logistics of committing fraud on an industrial scale

"Think big and implement to the finest detail" was the motto of Chun Chi-wai, chairman of China Metal Recycling (CMR), once the darling of fund managers and stock commentators.

Judging from the way he cooked the company's books, the 44-year-old entrepreneur practised what he preached.

"This was fraud on an industrial scale," said Mr Justice Jonathan Harris while approving an unprecedented winding up application by the Securities and Futures Commission against CMR.

When one has to turn a self-styled recycler of scrap metal into the largest in China within five years to fool the regulators into allowing a listing, the scale can only be grand.

First, you need to "invent" a business. What CMR did was it purchased scrap from suppliers and sold it, processed or unprocessed. Under Chun's instructions, dozens of companies were set up in Hong Kong, Macau, Bermuda and the US to play supplier and customer, the court heard. Chun then told the market these shell companies were agents working for the big boys.

CMR set up a subsidiary in Macau, called Central Steel Macao (CSM), to trade with these suppliers and customers. Macau may not sound too grand, but the city's lax corporate and tax surveillance suited Chun. The Macau subsidiary accounted for 36.6 per cent of CMR's business and contributed 128 per cent of its profit in 2012.